Banking Reform Bill, day two: Archbishop speaks again in House of Lords

Wednesday 16th October 2013

The Archbishop of Canterbury, Justin Welby, spoke in the House of Lords last night on the second day of the Committee Stage of the Financial Services (Banking Reform) Bill.

He spoke to Amendment 91B, tabled by Lord Phillips of Sudbury, which would require the Treasury to conduct a review of gaming markets.

The amendment was withdrawn by Lord Phillips without it being put to a vote.

Archbishop Justin’s speech is below and can be read in Hansard here. More information about the Bill can be found here.

‘My Lords, I am slightly surprised that the Minister should be resistant to what seems to me a very reasonable amendment. One of the dangers that we have faced in the markets over many years is that of parallel markets. The derivatives markets are, as we know, opaque, as has already been remarked on, and we examined them in some detail in the banking standards commission. The computer-driven markets are also very opaque. We examined those markets and remarked that they would constitute the next great crash.

When you have these gambling markets on the side that no one quite understands or knows who is participating in them, and which often take place offshore, it seems to me that at the very least there are grounds to hold an inquiry into the effect they are having on market prices through their impact on the shadow market—we should also examine the psychology of the dealers—and on those involved directly in the more regulated market.

One of the great lessons learnt from the events of 2008 was the ineffectiveness of the clearing system for over-the-counter derivatives, which there was no means of settling. That has been one of the major problems for the liquidators of Lehmans. The gambling markets have much the same problem. We are setting up mechanisms—they are being set up internationally—to deal with the settlement of derivatives contracts, but nothing is being done in this parallel market.

The noble Lord, Lord Phillips, has made a very useful point, albeit that the hour is late and it is almost 10.40 pm, which may enable this issue to become slightly clearer in terms of understanding what can be done.’